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More distance, more remittance? Remitting behavior, travel cost, and the size of the informal channel

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  • Fabrizio Ferriani
  • Giacomo Oddo

Abstract

The rising number of foreign workers in Italy during the last 15 years has led to a conspicuous increase in the amount of remittances sent abroad. In this paper, we examine the determinants of remittance outflows originated in Italy and transferred abroad through registered financial intermediaries. After controlling for a wide set of socioeconomic regressors, we document a strong positive relation between remittances and the cost of travel between Italy and the migrants' respective home countries. We interpret this result as indirect evidence of unrecorded flows, since the relation between remittances and travel cost should be non‐significant unless geographical proximity permits remitters to switch to informal (non‐observable) transmission mechanisms. Moreover, using data on temporal and monetary costs for a subset of bilateral corridors, we also find remittances to be negatively correlated with high transaction costs and low speed of transfer. We rely on this empirical evidence and on a model of migrants' remitting behavior to present new strategies for estimating the size of the informal outflow.

Suggested Citation

  • Fabrizio Ferriani & Giacomo Oddo, 2019. "More distance, more remittance? Remitting behavior, travel cost, and the size of the informal channel," Economic Notes, Banca Monte dei Paschi di Siena SpA, vol. 48(3), November.
    • Handle: RePEc:bla:ecnote:v:48:y:2019:i:3:n:e12146
    DOI: 10.1111/ecno.12146
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    Cited by:

    1. Agradi, Mawunyo, 2023. "Does remittance inflow influence energy poverty?," Applied Energy, Elsevier, vol. 335(C).
    2. Junaid Ahmed & Mazhar Mughal & Inmaculada Martínez‐Zarzoso, 2021. "Sending money home: Transaction cost and remittances to developing countries," The World Economy, Wiley Blackwell, vol. 44(8), pages 2433-2459, August.
    3. Alessio Ciarlone, 2023. "Remittances in times of crisis: evidence from Italian corridors," Temi di discussione (Economic working papers) 1402, Bank of Italy, Economic Research and International Relations Area.
    4. Luca Baldo & Elisa Bonifacio & Marco Brandi & Michelina Lo Russo & Gianluca Maddaloni & Andrea Nobili & Giorgia Rocco & Gabriele Sene & Massimo Valentini, 2021. "Inside the black box: tools for understanding cash circulation," Mercati, infrastrutture, sistemi di pagamento (Markets, Infrastructures, Payment Systems) 7, Bank of Italy, Directorate General for Markets and Payment System.
    5. Dinarte Diaz,Lelys Ileana & Jaume,David Jose & Medina-Cortina,Eduardo & Winkler,Hernan, 2022. "Neither by Land nor by Sea : The Rise of Electronic Remittances during COVID-19," Policy Research Working Paper Series 10057, The World Bank.
    6. Alessandro Croce & Marco Langiulli & Giuseppina Marocchi, 2020. "The weight of a Libra: are stablecoins a new challenge for external statistics compilers?," IFC Bulletins chapters, in: Bank for International Settlements (ed.), Bridging measurement challenges and analytical needs of external statistics: evolution or revolution?, volume 52, Bank for International Settlements.
    7. Kpodar, Kangni & Amir Imam, Patrick, 2024. "How do transaction costs influence remittances?," World Development, Elsevier, vol. 177(C).
    8. R. Isil Yavuz & Berrak Bahadir, 2022. "Remittances, ethnic diversity, and entrepreneurship in developing countries," Small Business Economics, Springer, vol. 58(4), pages 1931-1952, April.

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